The Trump Administration Rolls Back Anti-Corruption Efforts in the Oil Industry

In Nigeria, one anti-corruption campaigner fears that if the era of U.S.-led transparency initiatives is over, the relapse will be stark.

Photograph by Alex Webb / Magnum

In February, in one of its first acts of lawmaking, the Trump
Administration, with the Republican-controlled Congress, rescinded a
pending Securities and Exchange Commission rule that would have required
oil companies to disclose details of their payments to international
governments in connection with oil and gas production.

The rule, which was mandated by a law co-sponsored by former Republican
Senator Richard Lugar, of Indiana, and Democratic Senator Ben Cardin, of
Maryland, was designed to combat bribery and corruption, especially in poor countries governed by kleptocrats. Thirty other countries,
including Canada and the members of the European Union, had already
adopted similar requirements. Yet the American Petroleum Institute and
companies such as ExxonMobil, at the time when Secretary of State Rex
Tillerson was still its
C.E.O.,
had lobbied against the rule. They said that it was costly to implement
and gave unfair advantage to overseas competitors to which it did not
apply. When Trump took power, the lobbyists got their way.

A month later, Trump’s Interior Department signalled that the
Administration would also withdraw from a certification process of the
Extractive Industries Transparency
Initiative.
The E.I.T.I. is another corruption-fighting effort in the oil and mining
sectors that involves governments, corporations, and civil-society
groups. The United States officially endorsed the initiative, in 2004,
because the George W. Bush Administration believed that it could promote
better governance worldwide. The E.I.T.I. standards for transparency in
oil finance were initially imposed mainly on poor countries, but, under
the Obama Administration, the U.S. agreed, along with other wealthy
countries, to adopt the standards. Trump apparently intends to reverse
that decision. This is one more area, among many, where the U.S. no
longer leads by example.

President Trump frequently talks about repudiating Obama Administration
regulations and “bad deals,” but in some fields of international policy
he is moving with equal conviction to tear up programs promoting democracy and human
rights that were embraced by the Bush Administration and
congressional Republican internationalists such as Lugar. In effect,
Trump’s nationalism and the example of his own indifference to
ethics and financial disclosure risk incentivizing corruption abroad.

“I get a bit worried listening to the rollback that the current
government of the United States is actually pushing around the issue of
transparency and accountability,” Olanrewaju Suraju, an anti-corruption
campaigner in Nigeria, said this week at a conference on graft and the
oil industry that the Carnegie Endowment for International Peace hosted
in Washington, D.C. Nigeria has a growing middle class and pluralistic,
if venal, politics. The country’s anti-corruption activists and some
elected reformers have pioneered attempts to battle mass oil theft,
through financial-transparency initiatives supported by Europe and
America. If that era of transparency policy is over, Suraju said, the
relapse will be stark. Under military rule, Nigeria witnessed what
Suraju called “the mainstay of the economy operating like a criminal
enterprise,” bloating billion-dollar accounts held in foreign banks.
Things today are not wildly better, but at least there is a struggle
over policy and accountability, and the occasional meaningful arrest.
Still, the temptation to steal is great. Nigeria is a country, Suraju
pointed out, “where it is possible for two hundred thousand barrels of
crude oil to disappear on a daily basis.”

The problem is not just Trump’s indifference to promoting clean
government and the democratic rule of law but the persistent and
determined lobbying influence that the American Petroleum Institute and
other arms of the fossil-fuel industry wield in Congress. “We won the
argument about revenue transparency in 2003,” when Bush, no enemy of big
oil, was President, Simon Taylor, a co-founder of the investigative and
advocacy group Global Witness, said. “So what are we doing still talking
about it? It’s because of the capture of politics by industry.” The
American oil industry promoted transparency initiatives when
participation was voluntary, and the numbers to be reported were more
generalized, but it has balked at the kind of specific, mandatory
reporting that Lugar and Cardin urged.

It’s not as if oil-fuelled bribery or its corrosive effects on the
citizens of poor nations were diminishing. In April, Global Witness
published e-mails documenting the case of a payment of more than a
billion dollars that Royal Dutch Shell and the Italian oil company Eni
made to Nigeria through unusual channels. According to Global Witness,
Shell “knew it was party to a vast bribery
scheme,”
and international investigations are under way. Shell has said that the
payments were proper. In June, Human Rights Watch published an
extensive
report documenting how Equatorial Guinea, a small and impoverished oil
kleptocracy in West Africa where ExxonMobil operates, has diverted
national wealth away from investment in health and education, partly
because of a lack of financial transparency. (ExxonMobil says on its Web
site that its local affiliate has “dedicated considerable resources” to
programs aimed at “improving education and health,” providing drinking
water, and empowering women.) In July, the Justice Department announced
civil-forfeiture
proceedings to recover more than a hundred million dollars from two Nigerian
businessmen whom the department accused of paying bribes to a former oil
minister in order to win favorable oil deals. (The former minister has
denied the charges.) The prosecutors are hoping to recover a
fifty-million-dollar condominium at 157 West Fifty-seventh Street, in
Manhattan, and an eighty-million-dollar yacht, the Galactica Star, which
were among the men’s purchases.

There is something about oil production that fosters baroque corruption.
Oil cargoes trade in a liquid global market in which it is relatively
easy to mask ownership of an oil shipment or convert a stolen batch of
oil to cash. In many low-income countries, oil theft presents a unique
opportunity to obtain sudden transformational wealth, akin to drug
trafficking.

In 2014, the Organization for Economic Cooperation and Development
released a study of more than four hundred international bribery cases,
dating back to 1999. The O.E.C.D. monitors a convention against bribery
signed by forty-three countries, and the study sought to identify
patterns in public corruption. It found that almost two-thirds of all
foreign-bribery cases involved just four industries: resource
extraction, construction, transportation and storage, and
communication—all fields in which government contracts or licenses are
often required. The schemes reviewed were often high-level conspiracies;
in more than four out of ten cases, a management-level employee paid or
authorized the bribe, and in twelve per cent of the cases a chief
executive was directly involved. The Trump Administration, which
celebrates chief executives as fresh and effective leaders of
government, inherited imperfect but useful policies to combat this
scourge. It evidently isn’t interested.

Steve Coll, a staff writer, is the dean of the Graduate School of Journalism at Columbia University, and reports on issues of intelligence and national security in the United States and abroad. He is the author of “Private Empire: ExxonMobil and American Power.”